SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 39629 / February 9, 1998
Admin. Proc. File No. 3-8998
___________________________________
:
In the Matter of :
:
WILLIAM F. LINCOLN :
:
___________________________________:
OPINION OF THE COMMISSION
BROKER-DEALER PROCEEDINGS
Ground for Remedial Action
Respondent was convicted in 1995 of securities fraud, conspiracy to
commit securities fraud, and interstate transportation of monies
obtained by fraud. Held, it is in the public interest to bar
respondent from participation in any offering of a penny stock, and
from association with a broker, a dealer, or a member of a national
securities exchange or of a registered securities association.
APPEARANCES:
William F. Lincoln, pro se.
Edward G. Sullivan and Betty M. Terry, for the Division of
Enforcement.
Appeal Filed: January 28, 1997
Last Brief Filed: May 5, 1997
I.
William F. Lincoln, a former principal, director, and president of
First Alliance Securities, Inc. ("First Alliance"), a now-defunct broker-
dealer, appeals from the decision of an administrative law judge. The law
judge determined that, on the basis of Lincoln's conviction for securities
fraud, conspiracy to commit securities fraud, and interstate transportation
of monies obtained by fraud, the public interest requires that Lincoln be
barred from (i) participation in any offering of a penny stock and (ii)
association with a broker, a dealer, or a member of a national securities
exchange or of a registered securities association. Our findings are based
on an independent review of the record, except for those findings not
challenged on review.
II.
Lincoln began his career in the securities industry in March 1987.
Between 1987 and 1989, Lincoln was associated with several securities
firms. In January 1989, Lincoln and Calvin L. Word formed Word, Lincoln &
Co. Inc. ("Word Lincoln"). Lincoln was president and a director of Word
Lincoln. Shortly thereafter, Word Lincoln acquired First Alliance.
Lincoln thereafter served as a director, principal, and an officer of First
Alliance.
In 1993, Lincoln was indicted for his participation in a conspiracy to
commit securities fraud. On August 21, 1995, Lincoln was
convicted of one count of conspiracy to commit securities fraud, two counts
of securities fraud, and two counts of interstate transportation of monies
taken by fraud. Judgment was entered and sentence imposed on November 20,
1995. The indictment alleged that Lincoln and other
conspirators engaged in a widespread conspiracy to perpetrate a fraud on
First Alliance customers. Lincoln and others made material
misstatements to customers, including misstatements regarding the
liquidity, suitability, and level of risk of the securities, currently
available market prices for the securities, the likelihood that the
securities would be listed on a stock exchange, and the operations,
financial condition, and prospects of the issuers. They also omitted to
provide the customers with material information. They failed to disclose,
among other things, that First Alliance insiders had interests in the
securities the firm was promoting, that the firm was manipulating the price
of the stocks, and that the prices that the customers paid included
undisclosed excessive markups. The defendants and other conspirators also
engaged in a variety of sales practice violations. Among other things,
they effected unauthorized trades, employed high-pressure telephone sales
techniques, and charged customers arbitrary prices. They also refused to
Criminal Indictment, United States v. William F.
Lincoln, 1:93-CR-506 (N.D. Ga. filed Nov. 22, 1993).
Judgment in a Criminal Case, United States v. William
F. Lincoln, 1:93-CR-506-01-GET (N.D. Ga. Nov. 20,
1995).
Criminal Indictment, United States v. William F.
Lincoln, 1:93-CR-506 (N.D. Ga. filed November 22,
1993). We here adopt the allegations set forth in the
criminal indictment that served as the basis of the
general guilty verdict against Lincoln. See Wolfson v.
Baker, 623 F.2d 1074, 1078-79 (5th Cir. 1980), cert.
denied 450 U.S. 966 (1981) (issues alleged in the
indictment that are essential to the verdict must be
regarded as having been determined by the judgment);
Alexander V. Stein, Investment Advisers Act Rel. No.
1497 (June 8, 1995), 59 SEC Docket 1493, 1494 and 1501
(finding the allegations in the indictment that led to
the conviction of Mr. Stein demonstrate that he
willfully engaged in a scheme to defraud clients).
======END OF PAGE 2======
execute customer sell orders and to honor customer requests for the
proceeds.
Lincoln, among other things, purchased shares of stock in issuers that
the firm was offering and selling to the public and resold them to the firm
at a substantial personal profit. He also participated directly in the
transportation of funds in interstate commerce, knowing that the funds had
been stolen, converted, or taken by fraud. Additionally, Lincoln
fraudulently solicited a customer by falsely representing that he was
disabled and required a wheelchair.
Following his conviction, the trial judge sentenced Lincoln to six and
one-half years imprisonment and three years of supervised release.
Additionally, the judge ordered Lincoln to make restitution of $2.5 million
to his victims.
III.
This administrative proceeding was instituted on May 6, 1996. A
hearing was held on June 27, 1996, at the Federal Correctional Institution
at Jesup, Georgia, where Lincoln is serving his sentence. Lincoln does not
deny that he was convicted of the various securities-related crimes.
However, he objects to this proceeding on several grounds.
A. Lincoln attacks the validity of his conviction. Lincoln asserts
that he is a victim of an extortion plot involving the National Association
of Securities Dealers, Inc. ("NASD") and this Commission (including those
"up close to the president"). He states to us:
Because [I] refused to come up with the cash [I] was singled out and
prosecuted, for actions done in ignorance under the noses of 3 sets of
regulators. [I am] widely hated and the people opposed to [me] will
go to any length (fraud-suborn perjury) to get [me]!!!
As part of this conspiracy, Lincoln asserts that the United States Attorney
used perjured and incredible testimony. Lincoln further claims that he and
First Alliance were singled out for prosecution when other firms engaged in
the same conduct on a greater scale but were not prosecuted.
According to Lincoln, First Alliance was shut down by
the state of Georgia because penny stock broker-dealers
such as his firm were in competition with the state
lotteries. Lincoln further asserts that the judge who
heard his criminal case was biased against him because
the judge was an active stock speculator.
He argues that the criminal case was organized against
him because he sued the NASD, complained to the
Attorney General, and refused to bribe Commission
employees. He also asserts that his complaints to
(continued...)
======END OF PAGE 3======
Additionally, Lincoln contends that the actions that led to his
indictment were caused by the NASD's and this Commission's failures to
provide Lincoln knowledge or training. Asserting that he never
intended to defraud his customers, Lincoln argues:
I was only running a broker-dealer a few short months. You all [the
Commission and the NASD] failed to come in there and train me. You
all failed to do anything to help me to do what I was to do out there
with the public.
He also argues that he was entitled to a securities lawyer to defend him at
his criminal trial.
These objections, however, are inappropriate for this forum. A
criminal conviction cannot be collaterally attacked in an administrative
proceeding. This prohibition extends to issues relating to the
validity of the conviction, including the credibility of the evidence
presented at trial and any defenses to the criminal charge. Thus, Lincoln
is collaterally estopped from attacking here the merits of the criminal
proceeding againsthim, including the exercise of prosecutorial discretion,
(...continued)
Federal officials resulted in an investigation of the
NASD.
Lincoln also claims that our staff permitted the Firm
to continue to operate after the staff was aware of
problems with First Alliance in order to allow the Firm
to underwrite an offering for an issuer represented by
a former member of our staff. There is nothing in the
record to support this and Lincoln's other allegations
against the staff.
See Elliot v. SEC, 36 F.3d 86, 87 (11th Cir. 1994).
Cf. Blinder, Robinson & Co. v. SEC, 837 F.2d 1099, 1108
(D.C. Cir. 1988), cert. denied, 488 U.S. 869 (1989)
(holding that issues that could have been adjudicated
in a prior injunctive proceeding held in a District
Court cannot be litigated in a later administrative
proceeding); Benjamin G. Sprecher, Securities Exchange
Act Rel. No. 38485 (Apr. 8, 1997), 64 SEC Docket 720,
729; Alexander V. Stein, Investment Advisers Act Rel.
No. 1497 (June 8, 1995), 59 SEC Docket 1493, 1501.
To the extent Lincoln objects to this proceeding on the
basis of selective prosecution, his argument is without
merit. To establish a claims of selective prosecution,
Lincoln would have to demonstrate that this proceeding
was instituted based upon improper considerations such
as race, religion, or the desire to prevent the
(continued...)
======END OF PAGE 4======
the credibility of the evidence against him, and the denial of his request
for appointment of a defense attorney who specializes in securities law.
B. Lincoln argues that this action is premature because he has filed
an appeal of his conviction as well as a petition of habeas corpus. He
claims that this Commission should wait until the United States Court of
Appeals for the Eleventh Circuit has ruled on the "legality of the
underlying conviction itself." However, a conviction is a final decision
for the purpose of attaching liability. "Once the judgment of
conviction [i]s entered, respondent [i]s no longer entitled to the
presumption of innocence, and he stands convicted until such time as the
conviction is reversed or set aside." Therefore, nothing
"prevents a bar to be entered if a criminal conviction is on appeal."
C. Lincoln argues that this proceeding is time barred. Lincoln notes
that, under Section 2462 of Title 28 of the United States Code, an agency
is required to bring "an action, suit, or proceeding for the enforcement of
any civil fine, penalty, or forfeiture, pecuniary or otherwise" within
five years. Lincoln argues that, because the acts underlying his
conviction occurred more than five years before the institution of this
proceeding, this action is time-barred.
(...continued)
exercise of a constitutionally-protected right. See
Michael Markowski, 51 S.E.C. 553, 559 n.23 (1993),
aff'd, 34 F.3d 99 2d Cir. 1994); United States v. Huff,
959 F.2d 731, 735 (8th Cir.), cert. denied, 506 U.S.
855 (1992); C.E. Carlson, Inc. v. SEC, 859 F.2d 1429,
1437 (10th Cir. 1988); Baltimore Gas & Elec. Co. v.
Heintz, 760 F.2d 1408, 1419 (4th Cir.), cert. denied,
474 U.S. 847 (1985). We find no evidence of such
considerations here.
Paul M. Kaufman, 44 S.E.C. 374, 376 (1970) (a
conviction is a final judgment with respect to the
disqualification of a lawyer to practice before the
Commission).
Id.
Elliot v. SEC, 36 F.3d 86, 87 (11th Cir. 1994). This
proceeding was instituted solely on the basis of
Lincoln's criminal conviction. If that conviction is
reversed on appeal and his status as an associated
person of a broker-dealer, we would set aside this
proceeding. Cf. Jimmy Dale Swink, Securities Exchange
Act Rel. No. 36042 (Aug. 1, 1995), 59 SEC Docket 2877
(granting application to vacate sanction where
settlement provided for vacatur in the event the
respondent's conviction was reversed).
======END OF PAGE 5======
Section 2462, however, states that its limitation does not apply if a
different period is "otherwise provided by Act of Congress." Section
15(b)(6)(A)(ii) of the Exchange Act authorizes this Commission to take
action if an associated person "has been convicted within ten years . . .
." Because the Congress has authorized us to commence a proceeding to
determine whether a convicted person's association is in the public
interest up to ten years from the date of conviction, Section 2462 is not
applicable to this proceeding.
Even if Section 2462 applied here, however, this action would not be
time-barred. Section 15(b)(6)(A)(ii) of the Exchange Act authorizes us to
proceed against Lincoln on the basis of his conviction. The
order instituting this proceeding charges the fact of the conviction, not
the underlying conduct. Thus, for the purposes of Section 2462, it is the
date of Lincoln's conviction, not the conduct underlying the conviction,
which is relevant. We issued the order instituting this proceeding on May
6, 1996, five-and-a-half months after the November 20, 1995 judgment was
entered against Lincoln.
D. Lincoln asserts that this proceeding violates his Sixth Amendment
right to counsel. In general, however, the Sixth Amendment
does not entitle a respondent in an administrative proceeding to the
appointment of counsel.
See Russell G. Koch, Securities Exchange Act Rel. No.
38658 (May 20, 1997), 64 SEC Docket 1616, 1620-21
(holding that, since a cause of action does not accrue
under Section 15(b)(6)(A)(iii) until a final judgment
is entered, the date of the conduct underlying an
injunction is not relevant for statute of limitations
purposes); Timothy Mobley, Securities Exchange Act Rel.
No. 36689 (Jan. 5, 1996), 61 SEC Docket 42, 45
(proceeding under Section 15(b)(6)(A)(iii) is based on
the existence of an injunction, not the actions giving
rise to the injunction).
Lincoln also asserts that his defense was hampered
because he did not have access to certain unspecified
documents. It appears, however, that these documents
may relate to the merits of his criminal conviction,
and, if so, they would not be relevant here since he is
estopped from contesting the merits of that conviction.
See Feeney v. SEC, 564 F.2d 260, 262 (8th Cir. 1977),
cert. denied 435 U.S. 969 (1978); Boruski v. SEC, 340
F.2d 991, 992 (2d Cir.), cert. denied, 381 U.S. 943,
944 (1965). Throughout this proceeding, Lincoln
mounted a vigorous defense, raising, among other
things, the issues addressed here.
======END OF PAGE 6======
Lincoln suggests, however, that we should depart from this general
rule because this is a "criminally related action." Lincoln argues that,
under Massiah v. United States, 377 U.S. 201 (1964), the Sixth Amendment
requires that he be represented by a lawyer at all times after his criminal
indictment. Lincoln suggests that, because evidence gathered during this
proceeding somehow might be used against him if his conviction is
overturned and his criminal case remanded for retrial, we are required
under Massiah to provide him with counsel for this hearing. Massiah,
however, involved the use of a defendant's incriminating statements at
trial where such statements were surreptitiously procured in the absence of
counsel after the defendant was indicted. The Supreme Court stated in
Massiah that its holding was limited to a determination that these
particular statements could not be used as evidence against the defendant
at his criminal trial. Massiah does not discuss the right to
counsel in an administrative proceeding arising from a
conviction.
Even if the court of appeals were to grant Lincoln's request for a
retrial and evidence introduced in this proceeding were found to be
relevant to the retrial, it does not follow that Lincoln has a Sixth
Amendment right to an attorney for this proceeding. This proceeding is
neither a criminal prosecution nor criminal investigation.
The only sense in which this action is "criminally related" is that Section
15(b) of the Exchange Act allows Lincoln's felony convictions to serve as a
basis to sanction him. Should Lincoln prevail in his appeal of his
criminal conviction and that case is retried, he may move to suppress
evidence as he deems appropriate at his retrial.
E. 1. Lincoln claims that this action constitutes a violation of the
Double Jeopardy Clause of the Fifth Amendment. Lincoln argues that, since
he already has been convicted criminally, this proceeding constitutes a
Massiah, 377 U.S. at 207. The Court found that the
prosecution's use at trial of these incriminating
statements, obtained by a secret tape recorder placed
in a car after Massiah's indictment, violated Massiah's
Sixth Amendment right to counsel.
Id. at 207. In Massiah, the Court specifically found
that in many cases post-indictment aural surveillance
of a defendant without counsel is constitutional. Id.
at 206-07.
We note that the Division of Enforcement's case here
consisted of the introduction of certified copies of
the indictment, judgment, and certain minute orders
from the criminal proceeding; certified copies of
Commission
Forms B-D for First Alliance and its predecessor; and a
certified copy of an NASD disciplinary opinion discussed
infra.
======END OF PAGE 7======
second prosecution and/or punishment for the same underlying activity. In
Hudson v. United States, No. 96-976, 1997 U.S. Lexis 7497 (Dec. 10, 1997),
however, the Supreme Court held that a civil remedy is not "punishment" for
purposes of the Double Jeopardy Clause. In Hudson, the Office of the
Comptroller of the Currency imposed monetary penalties and barred the
petitioners from participation in the affairs of any banking institution.
Petitioners subsequently were indicted for essentially the same conduct and
sought dismissal of the indictment under the Double Jeopardy Clause.
The Supreme Court held that the Double Jeopardy Clause protects "only
against multiple criminal punishments for the same offense."
The Court then sought to determine whether the sanctions at issue were
civil or criminal. The Supreme Court stated that the first inquiry in
determining whether a remedy was civil or criminal was whether the
legislature expressed a preference "for one label or the other." The Court
recognized that the banking provision authorizing debarment "contains no
language explicitly denominating the sanction as civil." The
Court observed, however, that the power to debar was conferred upon the
banking agencies. The Court found that granting to an administrative
agency the power to impose this sanction was "prima facie evidence that
Congress intended to provide for a civil sanction."
The Court recognized that a penalty denominated as civil might be so
punitive in purpose or effect that it was transformed into a criminal
penalty. The Court suggested that
seven factors "provide useful guideposts" for this analysis.
However, the Court also stressed that "only the clearest proof" would
suffice "to override legislative intent and transform a civil remedy into a
Id. at *11 (emphasis added).
Id. at *19.
Id. at *19-20.
The Court cited the following factors:
(1) "whether the sanction involves an affirmative
disability or restraint"; (2) "whether it has
historically been regarded as a punishment"; (3)
whether it comes into play only on a finding of
scienter"; (4) "whether its operation will promote the
traditional aims of punishment -- retribution and
deterrence"; (5) "whether the behavior to which it
applies is already a crime"; (6) "whether an
alternative purpose to which it may rationally be
connected is assignable for it"; and (7) "whether it
appears excessive in relation to the alternative
purpose assigned." Id. at *12-13 (quoting Kennedy v.
Mendoza-Martinez, 372 U.S. 144, 168-69 (1963)).
======END OF PAGE 8======
criminal penalty." Using the identified factors, the Court
determined that the banking sanctions were civil, and the Double Jeopardy
Clause was not an obstacle to a criminal proceeding.
In light of the analysis in Hudson, we conclude that a broker-dealer
bar and a penny stock bar are civil in nature. As with the banking
statutes at issue in Hudson, Congress granted this Commission the authority
to impose such bars if required in the public interest. Hudson counsels
that a grant of such authority to an administrative agency is "prima facie
evidence" that these remedies are civil.
We have considered the factors identified by the Court, which the
Court has recognized are "certainly neither exhaustive nor dispositive"
and "may often point in differing
directions." Based on our consideration, we believe there is
no indication, let alone "the clearest proof" required by Hudson, that
these sanctions are criminal penalties. As the Supreme Court recognized
in Hudson, debarment has not historically been viewed as punishment.
The Court further made clear that debarment is "certainly
nothing approaching the `infamous punishment' of imprisonment."
We note that imposition of this sanction does not
necessarily require scienter. Section 15(b)(6)(A)(iii) of the Exchange Act
permits us to institute an administrative proceeding and impose, among
other things, a broker-dealer or a penny stock bar upon a finding that the
respondent has previously been enjoined from any violations of the
securities laws or the rules thereunder or from acting in any capacity as a
securities professional. Even if imposition of this sanction
Hudson v. United States, 1997 U.S. Lexis at *13.
United States v. Ward, 448 U.S. 242, 249 (1980).
Kennedy v. Mendoza-Martinez, 372 U.S. at 169.
Thus, the Supreme Court observed that "'revocation of a
privilege voluntarily granted,' such as debarment, 'is
characteristically free of the punitive criminal
element.", Hudson v. United States, 1997 U.S. Lexis at
*18, citing Helvering v. Mitchell, 303 U.S. 391, 399,
n. 2 (1938).
Hudson v. United States, 1997 U.S. Lexis at *21,
quoting Flemming v. Nestor, 363 U.S. 603, 617 (1960).
We may also, as we have done here, sanction a
respondent who is convicted of certain specified
crimes. That authority is also not limited to those
crimes that require scienter. Thus, we may impose a
sanction under Section 15(b)(6)(A)(ii) if the
respondent has been convicted of any misdemeanor
(continued...)
======END OF PAGE 9======
required a finding of scienter, however, that factor alone would not be
sufficient to conclude this remedy is criminal.
The Supreme Court recognized that such bars may serve as deterrents,
but it observed that deterrence can serve civil
goals. The Court concluded that the deterrence provided by the sanctions
in Hudson also served to maintain the stability of the banking industry.
The Supreme Court has previously recognized that, if a
sanction is designed to protect the public from harm, the sanction is
remedial in nature. Sections 15(b) and 19(h) authorize us to
impose sanctions only upon a finding that any such sanctions are in the
public interest. We believe that the sanctions here serve the purpose of
protecting investors and the integrity of the markets by preventing those
convicted of crimes from acting in the capacity of a securities
professional. We also previously have found that a penny
(...continued)
involving, among another things, the purchase or sale
of a security or the conduct of business as a broker or
dealer.
See, e.g., Hudson v. United States, 1997 U.S. Lexis at
*22; United States v. Ward, 448 U.S. at 250.
Hudson v. United States, 1997 U.S. Lexis at *22-23.
De Veau v. Braisted, 363 U.S. 144, 160 (1960).
Courts have long recognized that sanctions such as bar
orders, designed to protect the public from abuse,
qualify as remedial rather than punitive for the
purposes of the Double Jeopardy Clause. See U.S. v.
Stoller, 78 F.3d 710, 723 (1st Cir. 1996) (FDIC ban on
former CEO of bank from serving as an officer,
director, counsel, or control person of any federally
insured financial institution found remedial because
its purpose was to protect banks from perpetrators of
fraud); Bae v. Shalala, 44 F.3d 489, 496-97 (7th Cir.
1995) (holding that FDA ban barring respondent from
participation in the generic drug industry was remedial
because it was intended to protect the integrity of the
generic drug approval process); U.S. v. Hudson, 14 F.3d
536, 541-42 (10th Cir. 1994) (OCC sanction barring
subject from employment in the banking industry was
remedial because it was designed to protect the banking
industry from corruption); U.S. v. Furlett, 974 F.2d
839, 843 (7th Cir. 1992) (finding CFTC ban barring
subject from any contract market remedial because its
purpose was to ensure the integrity of the futures
markets); U.S. v. Bizzell, 921 F.2d 263, 267 (10th Cir.
(continued...)
======END OF PAGE 10======
stock bar served to restore confidence in the market by addressing
unscrupulous market practices and participants in the penny stock market.
We believe these purposes defeat an assertion that these
sanctions are criminal in nature. Lincoln has failed to make a showing
that these sanctions are criminal. Thus, we conclude this proceeding is
not barred by the Double Jeopardy Clause.
2. Lincoln also asserts that he was previously punished by the NASD
for the same activities that underlie the criminal conviction that is the
predicate for our proceeding. In 1990, the NASD filed a complaint against
Lincoln and First Alliance. Following a hearing, the NASD found that, at
around the time Word Lincoln took over First Alliance, the firm, through
Lincoln, had ceased maintaining required trading records. The NASD also
found that Lincoln had materially overstated First Alliance's net capital
in the firm's FOCUS Reports, representing that the firm had substantial net
(...continued)
1990) (holding HUD ban barring individuals from
participating in any HUD housing programs remedial
because its purpose was to purge government programs of
corrupt influences and to prevent improper dissipation
of public funds). Compare Johnson v. SEC, 87 F.3d 484,
491 (D.C. Cir. 1996) (distinguishing whether a sanction
is remedial for purposes of the Double Jeopardy clause
from its status of a penalty for purposes of the five-
year statute of limitation contained in 28 U.S.C.
2462).
See Sprecher, 64 SEC Docket at 728.
Lincoln also contends that the imposition of a penny
stock bar is prohibited by the Ex Post Facto Clause of
the Constitution. The Ex Post Facto Clause prohibits
application of a law retroactively that "inflicts a
greater punishment, than the law annexed to the crime,
when committed." Calder v. Bull, 3 U.S. (3 Dall.) 386,
390 (1798). This proceeding, however, was based on
Lincoln's criminal conviction, which occurred after
enactment of the Securities Enforcement Remedies and
Penny Stock Reform Act of 1990 ("Remedies Act"), which
authorized the imposition of a penny stock bar. The
Exchange Act provides that the conviction is an
independent basis for the proceeding; the date of the
underlying conduct is not relevant. In any event, the
application of the Ex Post Facto Clause to a sanction
depends on whether that sanction is remedial or
punitive. See Sprecher, 64 SEC Docket at 727-29 (and
cases cited therein). For the reasons discussed above,
we conclude that the Ex Post Facto Clause does not
prohibit the imposition of a penny stock bar on
Lincoln.
======END OF PAGE 11======
capital when, in fact, it had negative net capital. The NASD further found
that First Alliance, through Lincoln, had charged excessive and fraudulent
prices in the retail sales of seven penny stocks. The NASD concluded that
such mark-ups were fraudulent, excessive, and inconsistent with just and
equitable principles of trade.
Based on these violations, the NASD expelled First Alliance from
membership in the NASD and barred Lincoln from association with any NASD
member. The NASD also fined both First Alliance and Lincoln, and held them
jointly and severally liable for restitution in the amount of $2.5 million
of the violative markups charged to the firm's customers.
Lincoln argues that, because the NASD (which he characterizes as a
governmental entity) has sanctioned him, his criminal conviction was
punishment for the same conduct and thereby subjected him to Double
Jeopardy. We disagree with Lincoln. For the reasons discussed above, we
believe that the NASD's remedies are civil for purposes of the Double
Jeopardy Clause. Moreover,
the Double Jeopardy Clause applies only to the government. For purposes of
the Double Jeopardy Clause, the NASD is a private party and, "while [it] is
a closely regulated corporation, it is not a governmental agency . . . ."
Moreover, we disagree with his assertion that the alleged
violative conduct in both proceedings was identical. The NASD charged
Lincoln with recordkeeping violations, net capital violations, and
excessive markups that constituted violations of the NASD's Rules of Fair
Practice. In his criminal case, he was charged with securities fraud,
conspiracy to commit securities fraud and interstate transportation of
monies obtained by fraud. While markups were an element of the conduct
alleged, the criminal case included a variety of additional
allegations of misstatements and omissions of material facts and a variety
of violative sales practices neither charged nor found by the NASD. Thus,
we conclude that Lincoln was not "punished" for the same offense for which
he was disciplined by the NASD. Moreover, this issue is more properly
raised in Lincoln's criminal proceeding, and Lincoln can pursue it on
appeal of his
conviction.
Jones v. SEC, 115 F.3d 1173, 1183 (4th Cir. 1997).
See text accompanying n.3 supra.
Lincoln argues that any sanction imposed here is
duplicative of the NASD's disciplinary action against
him and that, moreover, we had the ability to review
that 1991 action. We have previously rejected this
argument. The Exchange Act contemplates multi-level
enforcement proceedings that permit Commission
administrative and injunctive actions, as well as self-
regulatory organization disciplinary proceedings and
criminal actions.
(continued...)
======END OF PAGE 12======
IV.
Lincoln also challenges the sanctions imposed by the law judge. The
selection of a remedy that is in the public interest involves consideration
of many factors. These include the egregiousness of the respondent's
conduct, the sincerity of respondent's assurances against future
violations, the defendant's recognition of the wrongful nature of his
conduct, and the likelihood that defendant's occupation will present
opportunities for future violations.
There is little doubt that Lincoln's violations were egregious.
Lincoln was an active participant and conspirator in an ongoing pattern of
fraud. Over many months and in numerous transactions in penny stocks,
Lincoln and his co-conspirators continued to violate the securities laws
and other federal laws in their endeavor to defraud their customers.
There is, moreover, much evidence in the record to indicate that
Lincoln would be a danger to investors were he permitted to reenter the
securities industry. Despite prompting by the law judge, Lincoln made no
assurances that he will refrain from committing future acts of fraud.
Lincoln also claims that, despite having worked in the securities industry
for two years, he has essentially no knowledge of the securities laws.
At times Lincoln denies having any knowledge of the firm's activity
and blames Calvin L. Word, his former partner at Word Lincoln and vice
president at First Alliance, for the firm's problems. At
(...continued)
We also have stated that a Commission-imposed bar order
gives us the right to sue in court pursuant to Sections
21(d) or 21(e) of the Exchange Act and seek sanctions
against a barred respondent who violates our order. Without
a Commission bar, we would be limited to oversight of the
NASD's actions with respect to persons subject to statutory
disqualification. Howard F. Rubin, Securities Exchange Act
Rel. No. 35179 (Dec. 30, 1994), 58 SEC Docket 1478, 1483-84.
See Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir.
1979), aff'd, 450 U.S. 91 (1981).
See Section II, supra.
"[M]y partner controlled the firm. But yeah, I mean I
signed papers. I didn't know a lot of what was going
on in that firm. I didn't -- wasn't aware of
everything I was signing. The lawyers brought me stuff
and said you sign it here. Calvin would be there with
them. I'd go ahead and I'd sign some things."
======END OF PAGE 13======
other times, Lincoln claims to be aware of at least some of the fraudulent
activity occurring at First
Alliance. Yet again, Lincoln appears to acknowledge some
wrongdoing on his behalf, but blames the NASD and the Commission for not
teaching him how to avoid breaking the law.
Lincoln also is evasive regarding whether he intends ever to work in
the securities business. At one point during the hearing Lincoln exclaims,
"[l]eave me out of [the securities business] because I don't want nothing
[sic] to do with it." Later, he adds, "And I would say to you that I am a
Christian person. I am not going in a million -- in a million years I am
not going to enter into securities stuff . . . ." On another occasion,
however, Lincoln states that, "I would have to say that I might consider
being a stock salesman for one of the firms. That's a possibility."
Lincoln's felony conviction, evasiveness, and failure to demonstrate
an understanding of his obligations under the federal securities laws
warrant the inference that, if given the opportunity, Lincoln would commit
further violations. The securities industry presents many opportunities
for abuse, and, therefore, it is in the public interest to avoid permitting
predatory individuals to expose investors to fraud. Many of the
transactions that were the basis of the indictment filed against Lincoln
involved low-priced stocks. For these reasons, the protection of public
investors makes it appropriate to bar Lincoln from participation in any
offering of penny stock and from association with a broker, a dealer, or a
member of a national securities exchange or a registered securities
association.
An appropriate order will issue.
By the Commission (Chairman LEVITT and Commissioners JOHNSON, HUNT,
CAREY, and UNGER).
Jonathan G. Katz
Secretary
"Did I knowingly break the law - - no. I fired people
for drug use. I fired them for stock fraud, but you
all never went on to investigate [a registered
representative]. [That representative] cheated all
these women in the Jesup garden group over here right
near this prison. He cheated all these women there,
you know, like I investigated it and fired him."
All the contentions advanced by the parties have been
considered. They are rejected or sustained to the
extent they are inconsistent or in accord with the
views expressed herein.
======END OF PAGE 14======
======END OF PAGE 15======
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 39628 / February 9, 1998
Admin. Proc. File No. 3-8998
__________________________________________________
:
In the Matter of :
:
William L. Lincoln :
:
__________________________________________________
ORDER IMPOSING REMEDIAL SANCTIONS
On the basis of the Commission's opinion issued this day, it is
ORDERED that William L. Lincoln be, and hereby is, barred from
participation in any offering of penny stock, and it is further
ORDERED that William L. Lincoln be, and hereby is, barred from being
associated with any broker, dealer or member of a national securities
exchange or a registered securities exchange.
By the Commission.
Jonathan G. Katz
Secretary